Avoid These Common Mistakes in High Net Worth Estate Planning
By: Barry E. Haimo, Esq.
October 21, 2021
One of the best parts of having a high-net-worth estate is knowing your family will be financially secure for years to come. But what if you haven’t taken the proper precautions to safeguard your assets?
Unfortunately, wealthy individuals can be saddled with probate, high taxes, and other financial burdens if they fall prey to these common high net worth estate plan mistakes. The greater your worth, the more complicated (and crucial) your estate planning can be!
This is why it’s so valuable to have a trusted attorney guide you through the process. Together, you can navigate the following common mistakes to ensure you and your heirs avoid legal and financial issues down the road.
Mistake 1: Failing to Update Your Estate Plan
If you checked your will or other estate planning items off your to-do list years ago, it’s quite possible that you haven’t thought about it since.
Mistake number one! Wills and other estate plans are living documents that must be revisited and updated regularly to reflect changes in your family, life, wishes, and possibly the law.
Just as importantly, you must update your plans every time your net worth changes. The ebb and flow of your wealth, business, and assets can alter the terms of your estate plan.
You want to review your plan at least every few years, and keep current and accurate records of your assets and estate. Otherwise you may be saddled with decreased wealth protection, increased tax liabilities, or unnecessary family conflict from outdated plans.
Mistake 2: Underestimating Estate Taxes
High net worth estates can be subject to high tax rates and liability — which can burden your heirs and diminish your assets. But planning ahead can protect your wealth and your beneficiaries from substantial tax liability.
There are a number of strategies to help reduce your estate taxes, including:
- Financial gifts to individuals (up to $15,000 a year, tax-free)
- Financial gifts to charities, tax-free
- Creating a trust, which can lower tax liability and helps avoid probate
- Open an LLC (limited liability company) to pass down assets to family, with lowered taxes
Mistake 3: Unclear Division of Assets
If you own multiple businesses or properties, having a clear plan for the division of your assets can avoid conflict, confusion, and turmoil. If you want to divide your assets among multiple people, you must have precise terms and language in your estate plan. Also make sure to put everything in writing and communicate clearly with your beneficiaries and the trustee or personal representative of your estate.
Trusts are estate planning tools that can help you design the best way to divide and distribute your assets clearly and prevent conflict among your heirs. They can also help avoid probate, which saves time, money, and stress.
Mistake 4: Neglecting An Advanced Care Directive
There are events in life that are impossible to foresee. Most people consider the terms of their estate after they have passed away… but neglect the possibility of a life event that makes it impossible to tend to their affairs while they’re still around.
If you become incapacitated, your estate can fall into disarray if you do not have advanced care directives in place. These documents help secure your estate and outline your wishes or appoint trusted individuals to act on your behalf if you are unable to make life decisions.
They can include:
- Power of Attorney
- Healthcare Surrogate or “Proxy”
- Living Will
High-net-worth estate plan mistakes are a hassle, but they are avoidable. Working with an experienced estate attorney can make all the difference. Contact Haimo Law for the support and guidance you need to plan and protect your estate now and in the future.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.